Creat Resources Holdings Limited
("CRHL" or "the Company")
Notice of General Meeting and Posting of Annual Report
Creat Re..

Half Year Report Dec 2011 16-Mar-2012

Directors’ Report

The directors of Creat Resources Holdings Limited (CRHL) submit herewith the financial report of Creat Resources Holdings Limited and its subsidiaries (the ‘Company’) for the half-year ended 31 December 2011. This report is intended to be read in conjunction with the 2011 Annual Report.

The Registered Office and principal place of business is Level 2, 116 Bathurst Street, Hobart, Tasmania 7000 Australia.

In order to comply with the provisions of the Corporations Act 2001, the directors report as follows:

The names of the directors and company secretary in office during or since the end of the half-year and up to the date of this report are:

Directors and Company Secretary

Name

Role

Appointed

Dr Yuewen Zheng

Executive Chairman,

Managing Director and Chief Executive Officer

Mr Tad Ballantyne

Deputy Chairman and Non-Executive Director

Mr Xiaojian Ren

Non-Executive Director

Mr Stephen Powell

Non-Executive Director

Mr Philip Simpson

Non-Executive Director

Dr Allan Branch

Company Secretary

22 August 2011

The above named directors and company secretary have been in office since the start of the half-year unless otherwise stated.

Past Directors and Company Secretaries

Name

Role

Term

Henry Lau

Non-Executive Director

Resigned 5 December 2011

Mr Michael McIntyre

Company Secretary

Resigned 1 July 2011

Ms Yasmine Healy

Company Secretary

Resigned 19 August 2011

Principal activities

The principal activities of the Consolidated Entity during the financial period were minerals exploration and the acquisition, exploration and operation of mineral properties in Australia. The Company was admitted to trading on AIM on 6 March 2007. The Company initially focused on zinc, lead and silver deposits in western Tasmania, Australia. Since July 2009 the Company has also pursued a strategy of acquisitions and other transactions that has resulted in expansion of its mining operations within and outside Australia and resource diversification (including gold, nickel, and a continued focus on lead, zinc and silver) in order to spread the risk of commodity fluctuations and increase shareholder value. There was no significant change in the nature of the Company’s principle activities during the reporting period.

Operating Results

The consolidated loss of the Company for the half-year after providing for income tax amounted to$1,135,441 (2010 loss: $15,947,580). This significant improvement is attributed to accounting for the gain of $5,861,987 on the Convertible Note options, (2010: loss of $9,545,126) and the significant change in the foreign exchange movement, with a loss of $119,837 for the six months ended 31 December 2011 (2010: gain of $4,033,335) (refer note 3 to the financial statements). The Company’s share of Loss of Associate is nil in 2011 due to the cessation of equity accounting upon the loss of significant influence over Galaxy Resources Limited effective 28 February 2011 (2010: share of loss of $3,953,688). Details of the Creat Group loans appear in the Going Concern statement on page 14.

Review of Operations

Galaxy Resources Limited, Investment Asset

Galaxy’s Mt Cattlin Mine in Western Australia.

Galaxy Resources Limited (“Galaxy”) is a Western Australian S&P / ASX 300 Index company which plans to become one of the world’s leading producers of lithium compounds – the essential components of rechargeable batteries for powering manufactured products like the world’s fast expanding fleet of hybrid and electric cars. In 2011, Galaxy’s Mt Cattlin mine plans to be the world’s second largest producer of lithium mineral concentrate globally, and through the development of its 17,000 tpa lithium carbonate plant in Jiangsu province, Galaxy expects to be one of the largest t lithium compound producers in China. Lithium compounds such as lithium carbonate are forecast to be in short supply against high future demand due to advances in long life batteries and their use in sophisticated electronics including mobile phones and computers. Galaxy has positioned itself to meet this lithium demand through vertical integration, by not only mining the lithium, but also by downstream processing to supply lithium carbonate to the expanding Asian market. Galaxy is also positioning itself for growth via mergers and acquisitions.

The Company’s shareholding in Galaxy at the start of the half-year was 38,091,616 shares or 11.78% of issued shares. There has been no change in the number of shares held by the Company during the reporting period, and CRHL retains 2 director positions on Galaxy’s board.

The market value of the Company’s investment in Galaxy has dropped during the half-year. The fair value for the investment in Galaxy Resources Limited based on the Australian Stock Exchange share price at 31 December 2011 is $26,854,589 (30 June 2011: $28,568,712).

Galaxy’s Jiangsu Lithium Carbonate Project in Jiangsu, PRC.

Galaxy Jiangsu is 100% owned by Galaxy and is intended to provide lithium to the China market as well as internationally to address the increasing demand for green energy. The Jiangsu plant has completed its commissioning and Galaxy has announced that the official opening ceremony, to be held on March 7, 2012, will be a milestone for the critical expansion in supply of lithium carbonate.

James Bay Project.

While Galaxy continues to undertake a feasibility study on its 20% owned James Bay Spodumeme Project in Quebec, Canada, it successfully completed the collection of a 10 tonne bulk sample of pegmatite ore, and has a farm-in arrangement with Canada’s Lithium One Inc., (TSX-VLI) to increase its stake up to 70% of the James Bay Project.

Mineral Assets, Zeehan, Western Tasmania

Exploration Activities

Retention Licences

Creat Resources Holdings Limited (“CRHL”) holds three (3) Retention Licences (RL’s) situated in the mineral rich area around Zeehan in western Tasmania. New drilling programs have been developed and partly implemented for all three licences over the reporting period. RL1/2008, (Mariposa), which is not due for renewal until 1 February 2013, has had several geological ground surveys implemented ahead of additional exploration this year. RL3/2009, (Oceana), has been active with a review of geological data and resampling of previously drilled diamond drill holes, while RL4/2009, (Comstock), has a potential new drilling program in development linked to EL30 exploration, in conjunction with the continuing Comstock rehabilitation.

Mariposa

Other than geological ground surveys, there has been no development activity in the 6 months to 31 December 2011. Retention Licence RL1/2008 was renewed in February 2011 for a further period of 2 years, with the term of the licence extending until 1st February 2013.

Oceana

RL3/2009 Oceana was granted on 01/02/2010 for an initial period of 2 years. The licence has been renewed until 1/2/2014 subsequent to the end of this reporting period. The assays for approximately 300 samples drilled in 2008 and earlier from Oceana deposit have recently been received from Burnie Laboratories, Tasmania and are being analysed and added to our resource modelling. The assay results have filled gaps in the Company drill hole database, and will be used to confirm and potentially upgrade the JORC Resources at Oceana deposit, Zeehan Project, Western Tasmania

Comstock

RL4/2009 Comstock was granted on 01/02/2010 for an initial period of 2 years. This licence has also been renewed for a period of 2 years subsequent to the end of this reporting period.

Mineral Resources Tasmania (MRT) has for several years held an environmental bond of $2.5 million from CRHL to cover the decommissioning and rehabilitation of the Comstock site. CRHL will be reimbursed the full bond amount upon successful completion of decommissioning and rehabilitation.

A draft Decommissioning and Rehabilitation Plan (DRP) was developed by CRHL and was submitted to the Environment Protection Authority (EPA) for review on 24 February 2012. CRHL have proposed that The DRP be divided into 2 phases. The first phase will rehabilitate the main problem areas at Comstock Mine, whilst leaving key infrastructure in place. The second phase includes removal of all site infrastructure, and total rehabilitation of the remaining disturbed areas. This separation of the works is to facilitate potential resumption of mining or exploration activities.

CRHL have invested in environmental work on RL 4/2009 to ensure the company’s compliance and policy of being environmentally sensitive. A lime dosing station was installed in January 2011 to improve the quality of water being discharged into the environment from Comstock Mine and this has recently been improved to increase efficiency and reduce lime costs. Earthworks have occurred across the site to reduce the acid generating potential of the waste rock. This has included profiling and compaction of the main waste rock dump and removal and burial of many smaller waste rock stockpiles. Several disturbed areas around the site have also been rehabilitated and reseeded with native plant species.

Upcoming environmental work on RL 4/2009 includes the development of a clay quarry to avoid purchasing clay off-site. This will be used to further reduce acid generating potential of the site by covering larger waste rock dumps with a thick layer of clay. The clay capping will also reduce the amount of lime dosing required to treat discharge water from the site.

The assays for approximately 700 samples drilled in 2008 and earlier from Comstock deposit were recently received from Burnie Laboratories, Tasmania. The assay results have filled gaps in the Company drill hole database, and will be used to confirm and potentially upgrade the JORC Resources at Comstock deposit, Zeehan Project, Western Tasmania.

Exploration Licences

CRHL holds four (4) Exploration Licences (EL’s) in the Zeehan area covering a total area of 109 square kilometres. During the last 6 months, the focus has been on strategic exploration including several new key drill holes and soil sampling which have then been part of the development for a comprehensive drilling program to be continued in the coming year. The first assay results showing lead-zinc deposits were announced to the market on 15 March 2012 and have been posted on the Company’s website.

During the planning activities, EL21/2004, (Razorback Project), which is not due for renewal until 25 June 2012, has been the subject of two potential JV discussions.

EL18/2003

A helicopter-supported diamond drill hole, TINDH01 was completed in EL18 to a total depth of 275.9m, adjacent to the recently completed Tenth Legion drilling program. The hole was collared in sandstones and siltstones of the Precambrian Oonah formation, and was completed within the Devonian Heemskirk Granite. Disseminated chalcopyrite and pyrite mineralisation at uneconomic grades was encountered at various depths within the sediments, and also within granite near the contact margins.

A geochemical grid comprising approximating 12 line-km has been cut in the northern part (of the southern block) of EL18. Possible extensions of the Avebury Nickel Mine host horizon within EL18 are targeted, mapping and rock-chip sampling has been completed.

During the reporting period there have been 3 soil sampling programs and 1 diamond drill hole on EL18, plus one additional diamond drill hole subsequent to the reporting period.

EL20/2002

Recently a diamond drill hole at Austral Prospect was drilled to a total depth of 344 metres within the Gordon Limestone near the Oceana Deposit. This drill hole was targeted on lead-zinc mineralisation and was aimed at following-up promising historical drilling results by previous explorers. The hole intersected a sideritic grey dolomitised argillaceous limestone containing disseminated and vein galena and sphalerite. Assays confirmed the existence of a broad zone of low-grade lead mineralisation. During the reporting period there have been two new diamond drill holes completed on EL 20.

EL21/2004

No drilling was completed during the reporting period. EL21/2004 includes known tin mineralisation at the historic Razorback and Grand Prize Tin mines. The licence is considered prospective for tin skarn mineralisation of the Renison Bell type, and the serpentinite units prospective for Avebury-Style nickel mineralisation.

The concentration for exploration on EL21 Razorback has been the entering of historic drillhole data centred around the historic tin workings into the company’s database, and the planning of two diamond drill holes to be submitted for Mineral Resources Tasmania (MRT) environmental approval.

Activity on EL21 is currently focussed on two potential joint venture negotiations.

EL30/2002

The primary focus at EL30/2002 Tenth Legion Prospect during the period was to evaluate the extent and quality of the long-known magnetite mineralisation present to determine the suitability as a Direct Shipping Ore (DSO).

The diamond drilling program has been completed at Tenth Legion, comprising a total of 26 diamond drill holes for 5100 metres. Significant mineralisation intersections were found in the latest group of 13 drill holes.

The Table below contains drill collar and orientation data for all 26 drill holes. A 3D section review of the drilling on the deposit has indicated the current likely dimensions of the northern body of magnetite mineralisation to be a strike length of 700-800 m, with a width of 20-40m and an interpreted down dip extent of 180m.

Assay results received so far indicate higher than expected levels of zinc, present as sphalerite (holes TLC30, TLC31, TLC33, TLC35, TLC36 and TLC37), but lower levels of tin and tungsten within the magnetite generally. The zinc mineralisation, where present, has generally been focussed towards the footwall of the magnetite zones.

The results from drill hole TLC33, with zinc and iron intercepts, has allowed further correlations to be made with previous CRHL drill holes TLC35 and TLC36. The TLC33 result effectively increases the strike length of the south Tenth Legion magnetite-zinc exploration target to at least 400m, with the prospective, largely undrilled magnetite lithology continuing to the south-west.

In order to establish a magnetite resource it is necessary to analyse for magnetite which is planned for next year using the Davis Tube Recovery (DTR) analytical method and using 2m composites taken from the drill core. A determination of the optimum grind-size for the DTR testing will also be undertaken. A decision will then be made as to what the end product will be: iron feedstock for smelting, or a dense medium separator in the coal washing business.

Twenty diamond drill holes will be summarised for the purposes of this report (table 3). These complete our drilling commitment for the reporting year. Two holes still await assays at the time of writing. Several other holes have been planned and permitted and may be drilled next year depending upon analysis of current work once assessed.

Collar details for EL30/2002 drill holes

Drill hole

Easting

Northing

RL

Az. (Mag)

Dip

Length

Drill hole status

Logged

Assays

TLC18

355320

5361492

248

177

-60

280.50

26/11/10

Yes

Yes

TLC20

355171

5361478

250

177

-50

217.50

11/01/11

Yes

Yes

TLC25

356338

5360934

358

193

-55

205.50

02/12/10

Yes

Yes

TLC26

355300

5360335

236

0

-90

168.20

13/05/11

Yes

Yes

TLC27

355561

5361452

265

177

-60

188.0

18/04/11

Yes

Yes

TLC28

355124

5360111

239

340

-45

117.0

24/01/11

Yes

Yes

TLC30

355384

5361422

250

177

-45

180.20

16/12/10

Yes

Yes

TLC31

355499

5361358

260

177

-45

166.50

11/01/11

Yes

Yes

TLC32

355381

5361440

250

177

-75

198.20

24/01/11

Yes

Yes

TLC33

355027

5360192

230

170

-60

190.20

02/02/11

Yes

Yes

TLC34

355416

5360740

288

267

-45

150.80

10/02/11

Yes

Yes

TLC35

355346

5360385

238

140

-55

241.30

26/02/11

Yes

Yes

TLC36

355338

5360287

240

0

-90

234.40

02/03/11

Yes

Yes

TLC37

355467

5361422

249

177

-80

248.80

24/03/11

Yes

Yes

TLC38

355467

5361422

250

177

-65

193.20

15/02/11

Yes

Yes

TLC39

355310

5361308

271

0

-90

63.80

25/04/11

Yes

Yes

TLC40

355296

5361358

267

0

-90

121.50

18/01/11

Yes

Yes

TLC42

355148

5361597

260

225

-45

162.80

24/12/10

Yes

Yes

SY159

359008

5360418

293

205

-50

213.60

16/11/11

Yes

No

SY160

359235

5360354

288

205

-50

244.6

08/12/11

Yes

No

Events Subsequent to Balance Date

DRP submission

The Company submitted a final draft of its Decommissioning and Rehabilitation Plan (DRP) to the Tasmanian Mineral Authority (MRT) in 24 February 2012 and that document is currently under review and assessment by the MRT. A short term provision of $770,175 for the rehabilitation works has been reflected in the Company’s Balance sheet.

Jiangsu plant

On 24 February 2012 Galaxy announced that the cold commissioning of its wholly-owned Jiangsu Lithium Carbonate Plant in China had been completed in mid-February and that its hot commissioning was underway on schedule. Galaxy held its official opening ceremony of the Jiangsu Lithium Carbonate Plant on 7 March 2012.

Shareholding changes

Steve Powell, non-executive director, sold 200,000, shares in CRHL for private reasons on 7 February 2012. His shareholding has reduced from 300,000 to 160,000 representing approximately 0.024% of the total voting rights.

Renewal and Status of Retention and Exploration Licences

Renewal applications were submitted to Mineral Resources Tasmania (MRT) in February 2012 for EL30/2002, EL20/2002, RL3/2009, RL4/2009 and EL18/2003. Licences remain in force pending renewal confirmation. The table below summarises the status of the licences during and subsequent to the reporting period.

CRHL Tenement Schedule – Licences Status Pending and Renewal

Tenement

Locality/Name

Area

Renewal Status

Renewal Date

Expiry Date

Exploration Licence

EL18/2003

Zeehan (Tenth Legion)

14 sq km

Pending renewal with bond increase

10/02/2011

10/02/2013

Exploration Licence

EL20/2002

Zeehan (Austral, Oceana, Mariposa)

68 sq km

Renewed

29/02/2012

31/01/2013

Exploration Licence

EL21/2004

Zeehan (Razorback)

13 sq km

Current

25/06/2012

25/06/2012

Exploration Licence

EL30/2002

Zeehan (Tenth Legion, Comstock, West Comstock)

8 sq km

renewed

29/02/2012

31/1/2013

Retention Licence

RL1/2008

Mariposa Creek (6km SE of Zeehan)

3 sq km

Current

01/02/2011

01/02/2013

Retention Licence RL3/2009

Oceana

1 sq km

Renewed

20/02/2012

01/02/2014

Retention Licence RL4/2009

Comstock

3 sq km

Renewed

20/02/2012

01/02/2014

Auditor’s Independence Declaration

The auditor’s independence declaration, as required under section 307C of the Corporations Act 2001, is included on page 17 of the half-year report.

Signed in accordance with a resolution of directors made pursuant to s.306(3) of the Corporations Act 2001.

On behalf of the Directors

Tad Ballantyne

Director

Stephen Powell

Director

Dated this 15th day of March 2012

Consolidated

Half-year Ended

Note

31 Dec 2011

31 Dec 2010

$

$

Continuing Operations

Revenue

112,743

98,165

Other Gains and Losses

3

5,736,910

(5,511,791)

Exploration and Evaluation Costs Expensed

(290,787)

(609,446)

Depreciation Expense

(137,944)

(155,640)

Finance Costs

(4,435,966)

(3,150,237)

Administration Expenses

(432,154)

(294,344)

Loss on Disposal of Assets

30,569

(373)

Employee Expenses

(887,665)

(1,405,449)

Site Operations

(746,773)

(858,440)

Other Expenses

(84,374)

(107,337)

Share of Loss of Associate

-

(3,952,688)

Loss before Tax

(1,135,441)

(15,947,580)

Income Tax Benefit

-

-

Loss for the Period

(1,135,441)

(15,947,580)

Other Comprehensive Income

Share of other comprehensive income of associate

-

742,006

Reserve – AFS Investment

(1,714,123)

-

Other Comprehensive Income for the Period

(net of tax)

(1,714,123)

742,006

Total Comprehensive Loss for the Period

(2,849,564)

(15,205,574)

Earnings Per Share

Basic (cents per share)

(0.17)

(2.39)

Diluted (cents per share)

(0.17)

(2.39)

The accompanying notes form part of these condensed consolidated financial statements which must also be read in conjunction with the 2011 Annual Report.

Consolidated

Note

31 Dec 2011

30 June 2011

$

$

Assets

Current Assets

Cash and Cash Equivalents

185,616

263,714

Trade and Other Receivables

24,361

28,043

Other Current Assets

144,630

126,542

Total Current Assets

354,607

418,299

Non-Current Assets

Property, Plant and Equipment

982,909

1,164,990

Exploration and Evaluation Asset

250,000

250,000

Other Financial Assets

29,354,589

31,068,712

Total Non-Current Assets

30,587,498

32,483,702

Total Assets

30,942,105

32,902,001

Liabilities

Current Liabilities

Trade and Other Payables

301,993

435,458

Financial Liabilities

4

33,280,455

32,533,017

Provisions

770,175

1,450,954

Total Current Liabilities

34,352,623

34,419,429

Non-Current Liabilities

Financial Liabilities

4

4,240,535

4,225,628

Provisions

2,257,942

1,316,375

Total Non-Current Liabilities

6,498,477

5,542,003

Total Liabilities

40,851,100

39,961,432

Net Liabilities

(9,908,995)

(7,059,431)

Equity

Issued Capital

69,408,416

69,408,416

Reserves

(1,369,592)

344,531

Accumulated Losses

(77,947,819)

(76,812,378)

Total Deficit

(9,908,995)

(7,059,431)

The accompanying notes form part of these condensed consolidated financial statements which must also be read in conjunction with the 2011 Annual Report.

Issued Capital

Retained Earnings

Share of Associate's Reserve

Other Reserves

Total

$

$

$

$

$

Balance at 1 July 2009

69,408,416

(56,373,289)

462,415

344,531

13,842,073

Loss for the Period

-

(15,947,580)

-

-

(15,947,580)

Total comprehensive income for the period

-

(15,947,580)

-

-

(15,947,580)

Share of Associate's Reserves

-

-

742,006

-

742,006

Balance at 31 December 2010

69,408,416

(72,320,869)

1,204,421

344,531

(1,363 ,501)

Balance at 1 July 2011

69,408,416

(76,812,378)

-

344,531

(7,059,431)

Loss for the Period

-

(1,135,441)

-

-

(1,135,441)

Total comprehensive income for the period

-

(1,135,441)

-

-

(1,135,441)

Reserve - AFS Investment

-

-

(1,714,123)

(1,714,123)

Balance at 31 December 2011

69,408,416

(77,947,819)

-

(1,369,592)

(9,908,995)

The accompanying notes form part of these condensed consolidated financial statements which must also be read in conjunction with the 2011 Annual Report.

Consolidated Half-year Ended

31 Dec 2011

31 Dec 2010

$

$

Cash Flows from Operating Activities

Receipts from Customers

39,464

274,307

Payments to Suppliers and Employees

(2,559,700)

(2,666,577)

Net Cash used in Operating Activities

(2,520,236)

(2,392,270)

Cash Flows from Investing Activities

Purchase of Property, Plant & Equipment

(5,294)

(18,013)

Proceeds from the sale of Property, Plant & Equipment

80,000

-

Interest Received

76,961

136,192

Net Cash (used in) / provided by Investment Activities

151,667

118,179

Cash Flows from Financing Activities

Interest Paid

(9,529)

(20,518)

Proceeds from Borrowings

2,300,000

-

Repayment of Borrowings

-

(261,124)

Net Cash (used in) / provided by Financing Activities

2,290,471

(281,642)

Net (decrease) / increase in Cash and Cash Equivalents

(78,098)

(2,555,733)

Cash and Cash Equivalents at Beginning of the Half-Year

263,714

2,997,107

Cash and Cash Equivalents at the End of the Half-Year

185,616

441,374

The accompanying notes form part of these condensed consolidated financial statements which must also be read in conjunction with the 2011 Annual Report.

Note 1: Significant Accounting Policies

Statement of Compliance

The half-year financial report is a general purpose financial report prepared in accordance with the Corporations Act 2001 and AASB 134 Interim Financial Reporting. Compliance with AASB 134 ensures compliance with International Financial Reporting Standard IAS 34 Interim Financial Reporting. The half-year report does not include notes of the type normally included in an annual financial report and shall be read in conjunction with the most recent annual financial report and the public announcements made during the half-year in accordance with the continuous disclosure requirements of the Corporations Act 2001.

Basis of Preparation

The condensed consolidated financial statements have been prepared on the basis of historical cost, except for the revaluation of certain non-current assets and financial instruments. Cost is based on the fair values of the consideration given in exchange for assets. All amounts are presented in Australian dollars, unless otherwise noted.

The accounting policies and methods of computation adopted in the preparation of the half-year financial report are consistent with those adopted and disclosed in the company’s 2011 annual financial report for the financial year ended 30 June 2011, except for the impact of the Standards and Interpretations described below. These accounting policies are consistent with Australian Accounting Standards and with International Financial Reporting Standards.

New and revised Standards

The Company has adopted all of the new and revised Standards and Interpretations issued by the Australian Accounting Standards Board (the AASB) that are relevant to their operations and effective for the current reporting period.

New and revised Standards and Interpretations effective for the current reporting period that are relevant to the Company include:

AASB 2010-3 Amendments to Australian Accounting Standards arising from the Annual Improvements Project.

AASB 2010-4 Further Amendments to Australian Accounting Standards arising from the Annual Improvements Project

AASB 2009-14 Amendments to Australian Interpretation – Prepayments of a Minimum Funding Requirement

Interpretation 19Extinguishing Liabilities with Equity Instruments

The adoption of these amendments has not resulted in any changes to the Company’s accounting policies and has no effect on the amounts reported for the current or prior periods.

Going Concern

The financial report has been prepared on the going concern basis, which assumes continuity of normal business activities and the realisation of assets and the settlement of liabilities in the ordinary course of business.

The consolidated entity is in a development stage and in the course of its activities has sustained operating losses. It expects such losses to continue for at least the next 12 months. The consolidated entity will finance its operations primarily through cash and cash equivalents on hand, future financing from the issuance of debt or equity instruments and through the generation of revenues once commercial operations get underway. However, the consolidated entity has yet to generate any significant revenues and has no assurance of future revenues.

The following plan is in place by Management to support the going concern basis of the consolidated entity.

On 13 March 2012 the Company received an undertaking from Creat Group in that, for the purpose of assisting CRHL to achieve its working capital forecast through to 31 March 2013, Creat Group undertakes to:

· continue to provide further funding to CRHL as required with interest rates based on market interest rates; and

· not call for or cause repayment of any loans or convertible notes, including the following loans and convertible notes:

§ All convertible notes on issue and held by Creat Group at 31 December 2011;

§ The GBP500,000 loan, interest rate 10%, entered into in September 2009 and currently due for repayment;

§ The GBP1,200,000 loan, interest rate 0%, entered into in January 2011 and currently due for repayment;

§ The A$2,000,000 loan, interest rate 10%, entered into in April 2011 and fully payable 12 months from drawdown;

§ The A$1,000,000 loan, interest rate 12%, entered into in August 2011 and currently due for repayment;

§ The A$1,000,000 cash advance provided to CRHL in September 2011; and

§ The A$1,000,000 cash advance facility available to CRHL, of which A$300,000 was drawn down in December 2011.

The total amount outstanding at 31 December 2011 relating to the above convertible notes and loans including accrued interest is $37,492,663.

At the date of this report and having considered the above factors, the directors are confident that the consolidated entity will be able to continue as a going concern.

Note 2: Segment Information

AASB 8 requires operating segments to be identified on the basis of internal reports about components of the Company that are regularly reviewed by the chief operating decision maker in order to allocate resources to the segment and to assess its performance.

The fair value of the investment in Galaxy Resources Limited at 31 December 2011 is $26,854,589 (30 June 2011; $28,568,712).

Provision for Restoration and Rehabilitation

In accordance with State Government legislative requirements, a provision for rehabilitation of the Comstock mine site has been recognised. Management has revised the estimate of time to complete the rehabilitation and now envisage the majority of rehabilitation will be completed within the next 46 months.

Note 4: Financial liabilities

Financial liabilities include the following loans and convertible notes:

31 Dec 2011

30 Jun 2011

$

$

Current

Unsecured convertible notes (i)

26,087,635

27,625,363

Unsecured loans from related party (ii)

7,164,493

4,662,843

Loan insurance

28,327

-

Withholding tax payable

-

244,811

33,280,455

32,533,017

Non-Current

Unsecured convertible notes (iii)

4,240,535

4,225,628

The following loans and convertible notes are all held with the ultimate parent entity, Creat Group.

(i) One unsecured convertible note matured on 31 December 2011, and one unsecured convertible note is due to mature in April 2012. These two convertible notes have an interest rate of 10%.

(ii) Three unsecured loans from a related party are currently due for repayment and one unsecured loan will fall due for repayment in April 2012. One of these unsecured loans has an interest rate of 0%, two have an interest rate of 10% and one has an interest rate of 12%. Two cash advance facilities are in place and have an interest rate of 0%. At 31 December 2011 $700,000 of a $1,000,000 facility was still available to the company. Subsequent to this date, a further $300,000 has been drawn down.

(iii) Six unsecured convertible notes are due to mature in February 2013 and have interest rates of 6%.

The above unsecured convertible notes and unsecured loans are covered by a letter of financial support from Creat Group (refer Note 1).

The movement in non-current financial liabilities is predominantly due to movement in the fair value of convertible notes.

Note 5: Contingencies and commitments

There are no known contingent liabilities or contingent assets since the end of the last annual reporting period.

Note 6: Subsequent events

DRP submission

The Company submitted a final draft of its Decommissioning and rehabilitation Plan (DRP) to the Tasmanian Mineral Authority (MRT) in 24 February 2012 and that document is currently under review and assessment by the MRT. Short term provision of $770,175 for the rehabilitation works is in the Company’s Balance sheet.

Jiangsuplant

On 24 February 2012 Galaxy announced that the cold-commissioning of its wholly-owned Jiangsu Lithium Carbonate Plant in China had been completed in mid-February and that its hot-commissioning was underway on schedule. Galaxy held its official opening ceremony of the Jiangsu Lithium Carbonate Plant on 7 March 2012.

Shareholding changes

Steve Powell, non-executive director, sold 200,000, shares in CRHL for private reasons on 7 February 2012. His shareholding has reduced from 300,000 to 160,000 representing approximately 0.024% of the total voting rights.

There has been no other event after balance sheet date that could have a material effect on the company’s operations.

The directors declare that:

(a) in the directors’ opinion, there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable; and

(b) in the directors’ opinion, the attached financial statements and notes thereto are in accordance with the Corporations Act 2001, including compliance with accounting standards and giving a true and fair view of the financial position and performance of the consolidated entity.

Signed in accordance with a resolution of the directors made pursuant to section 303(5) of the Corporations Act 2001.